[Opinion] Can Auditor Certify Prospective Financial Information (“PFI”)?
- Blog|News|Account & Audit|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 29 December, 2023
Latest from Taxmann
CA Bharat Sonkhiya & Namah Kachwala – [2023] 157 taxmann.com 658 (Article)
Accounting and Auditing
Can A Chartered Accountant certify future, If yes then how?
Like an astrologer reading the palm or perhaps more like a doctor examining the human body and diagnose diseases thereof.
Index to the answer of this question:
- Introduction
- Mandate by ICAI
- Forecast v/s Projection
- Guiding Principles for Assignment
- Need of Auditors Assurance regarding PFI
- Need of PFI, in different situations
- Level of Assurance by a Chartered Accountant (CA) in PFI
- Period Covered
- Presentation and Disclosures in PFI
- Acceptance of Engagement
- Examination Procedures
- Documentation
- Reporting Requirement by Auditor
- Conclusion
Introduction
We all are familiar with the term financial information but the concept of Prospective Financial Information may be untouched by many of us.
Basically the Prospective Financial Information means the financial information that businesses predict about their future based upon the events that may or may not occur and thus it involves considerable judgement also.
Mandate by ICAI
ICAI under Clause 3 of Part 1 of the Second Schedule to the Chartered Accountants Act, 1949 permits a CA to give assurance on the PFI. If he does not comply with the requirements he can be proved to be guilty of his actions.
A Chartered Accountant can participate in and review the PFI provided that the report mentions the source of information, basis of forecast, major assumptions made.
The auditor also needs to state that “he does not vouch for the accuracy of the information”
Prospective financial information can be reviewed by a practicing Chartered Accountant; they need not be a statutory auditor exclusively.
PFI can be in the forms of:
- Forecast, or
- Projection, or
- Combination of both.
The auditor’s responsibility for prospective financial information goes beyond historical statement audits, demanding heightened diligence during the examination of prospective financial statements.
Forecast v/s Projection
| Aspects | Forecast | Projection |
| Definition | Forecast is based on assumptions of expected future events and managements action. | Projection is based on future events and management actions which are not necessarily expected to take place |
| Basis of Assumptions | Best-estimate assumptions | Hypothetical assumptions or mixture of best estimate and hypothetical assumptions. |
| Presenting Different Scenario | It depicts the Possible scenario based on future events that will occur | It depicts the “What-if” scenario in which no surety is there of occurrence of future events |
Click Here To Read The Full Article
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
CA | CS | CMA
